Week 1 - Economic Perspectives Pt.1

Question 1

Define Economics

Answer 1

Economics is the study of how we best satisfy unlimited wants and needs with limited resources.

Question 2

Define Opportunity Cost (Economic Principle)

Answer 2

The SINGLE best alternative option forgone when you decide on a particular option.

Question 3

How To: Derive Demand (Economic Principle)

Answer 3

Assess the Willingness to Pay (WTP).
Ex. Hungry Jacks Example. Buy a whopper for $5. Sale goes on, buy second one for $4. I’m full for a third, but if its 50c, I’ll buy it. If it’s $2, I won’t.

Question 4

Define Marginal Cost

Answer 4

The cost of producing the next unit.

Question 5

Define Market Equilibrium

Answer 5

When everyone is happy!
When the price and quantity meet, there is a cross-over where the quantity supplied matches the price, therefore supply and demand are right for the market.

Question 6

Define Consumer Surplus (CS)

Answer 6

When a customer valued the item for less than they paid for it.

Question 7

Define Producer Surplus (PS)

Answer 7

When the cost of producing the unit (marginal cost) is lower than they sold it for.